Sunday, 27 October 2013

Divorce and Real Estate - What Do We Do With the House?

Many families in America, Hawaii included, have faced an extraordinary amount of stress given the state of the housing market and economy over recent years. Unfortunately, this stress can make its way into the very fabric that holds a family together and can ultimately lead to a divorce. While some divorces are amicable and some are... well, not... it's almost a given that the process is going to have its share of pitfalls, especially where a house is thrown into the equation. That's why it's good to understand your options.

Going through a divorce and all its strain is hard enough. Going through a divorce and trying to split marital assets becomes even harder. It's one thing to split a couple cars or furniture, but what about a house? A 2000 sq ft house on Oahu worth over $400,000 or that nice Waikiki penthouse overlooking Diamond Head and the beach? Can you see how it might get messy? In many cases, the couple just wants to get on with their lives but can't with too many things in limbo. For some, their home is just a constant reminder of "what used to be". It can quickly turn into a burden and heartache at the same time when one is forced to leave their home and if the one left behind cannot afford it.

Quite often during the divorce process, the presiding Judge orders the house to be sold and assets to be split between the two parties. In this case, most parties involved just want it to be over as soon as possible. As they begin new chapters in their lives, the last thing they need and want is the emotional attachment to a house they once called "home" following them around into the future. They want closure.

Of course, there are plenty of divorces where one spouse remains in the house for the short or long term, usually at some financial compensation for the departing partner, especially if both names were on the mortgage. However, if a sale of the asset is the chosen (or ordered) course of action, then you need to decide the nature of the sale. What will you do with that nice 3br/2ba Honolulu house with the papaya and mango trees in the front yard? Will you list it with a realtor? It might sit on the Hawaii MLS overpriced for months as the agent hopes for a higher commission, delaying both your emotional closure and receipt of any financial gain.

Another option, and often the better one, is to approach a local Hawaii real estate investor. An investor will pay all cash and can likely close the deal in 30 days or less. You'll usually have to provide a substantial discount because the investor will have a profit motive for the property and will need to capture some equity, but the prime advantages are threefold. One, you will be saving months of additional mortgage payments. Two, an investor will almost always come unrepresented, meaning that you as the seller can save that 6% of commission fees that you would otherwise have to pay if you listed it with a realtor (this can be tens of thousands of dollars back in your pockets). And three, you'll finally be able to wash your hands of some heartache. The investor can also work with your divorce attorney(s) to ease the entire sale process.

If the mortgage on the property is upside down, meaning the balance on the loan is greater than the current property market value, or a foreclosure is looming, then you should still contact an investor with short sale experience because they bring a different tool set and strategy to the situation. They also will have no interest at all in overpricing your property on the MLS because they are not paid on commission. At the end of the day, you're still likely to come out ahead with the removal of the property from your divorce case and your lives.

Your house has been your home. Work, money, time and love went into it over the years. Your home is a milestone of memories. Foundations for a strong family, work ethic and your credit history were built one brick at a time. Just know that you are not alone in going through this situation. Plenty of families across America are asking the same question - now that I'm going through this divorce, what are my options with the house?

While one of you may end up staying in the property at compensation to the other, you may instead find that selling your home to a professional real estate investor provides what you really seek - closure.While the price will usually be less than market value and will depend on any outstanding mortgage or lien amounts, condition and the equity in your home, you still might be able to capture a nice profit at the end of the day. You'll also be saving months of mortgage payments because the investor will want to close as soon as possible. This is often the best scenario as it allows for the quickest sale of your property and relief of the emotional burden. Closure. And with a divorce being difficult enough, isn't that what you're really looking for? Most would say 'yes'.